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ALMEDALEN 2022

Swedish finance minister: voters may have to accept falling real wages

Sweden's finance minister had told The Local that this year's election will largely be about rising costs, but that his party is not planning to intervene to prop up real incomes and so worsen inflation.

Swedish finance minister: voters may have to accept falling real wages
Swedish Finance Minister Mikael Damberg at the Swedbank seminar on Swedens economic situation. Photo: Richard Orange

Speaking at a seminar on Sweden’s economic situation hosted by Swedbank, Mikael Damberg agreed that the coming campaign would be a so-called plånboksval, or “pocketbook election”, where rising costs and falling spending power are the dominant issue, but he said he thought this would benefit rather than harm the Social Democrats. 

“Economic issues will be very important,” he told The Local, “and I think people will think about who will be best in charge of the public finances, and who has been in government and handled tough situations, and I think that Magdalena Andersson, as the Prime Minister with seven years as Minister of Finance, is the right woman to lead Sweden in these difficult times.”

His worry, he said, was that Sweden’s political parties would respond to inflation levels of close to eight percent by promising voters subsidies and cash transfers to make up for rising prices, which if implemented would then risk fuelling an inflationary spiral. 

“It might be |a problem] if the parties draw the wrong conclusion, and think that they can spend a lot of money right now. Because if they spend too much money, too broadly, not focusing on vulnerable groups, then inflation will go up, and interest rates will go even higher. And that would actually worsen the situation in the wallet for ordinary people.” 

Instead, Damberg said that people living in Sweden would ideally simply tighten their belts and tolerate a period of falling real incomes. 

“For 25 years in Sweden, we have had real wage increases for ordinary workers, and that’s kind of unique on an international perspective. So this year, there will be a drop in real wages because of inflation,” he said.

He said that he hoped that in next year’s negotiations between unions and employers over new collective bargaining agreements, unions were as responsible as they have been historically, and avoided calling for inflationary pay hikes. 

“It’s tough. The war has made us all less rich, and some groups will be affected very much. But I think, there’s no point in getting wage increases if it pushes inflation higher. The trick here is to get wage increase that are for real, and not just on paper.” 

In the seminar, he said that there was a danger that the huge emergency spending packages Sweden, like other countries, had put in place to soften the impact of the Covid-19 pandemic would set a precedent, leading voters and politicians to think it was possible for governments to spend their way out of the coming economic difficulties in a similar way. 

His intention, he said, if he was reappointed finance minister after the election, would be to keep the tax rate roughly level with where it is now, neither raising nor lowering taxes, in the hope that Sweden’s state finances go into a small surplus next year. 

He said it had been right this year to pass measures to increase the incomes of the poorest families and the poorest pensioners, and that his party would still seek to give aid targeted those least able to cope with rising prices. 

“Politics has a role,” he said. “But you need to be careful not to create too big a role, because if you think that politics can do everything, then we will start fuelling inflation. It’s a lot harder now than it was in the pandemic.” 

Shortly before the seminar, Ulf Kristersson, leader of the opposition Moderate Party, made a speech in which he accused the government of bringing in 46 new taxes over the last four years, and together in a “left-wing cartel” with other parties of planning a series of tax hikes, including a property tax, a tax on savings, a wealth tax, a tax on the highest incomes, and a reduced tax break on cleaners and other households services.

“I think they’re a bit desperate, because they’re not doing that well in the polls,” Damberg said. “So one way [of improving the situation] is to try to frighten voters. But I think our record speaks for itself, and I think Magdalena Andersson has got a lot of credibility when it comes to handling Swedish economy.” 

“She has not introduced a property tax, and she has not in the last period in government increased the tax burden on ordinary people. If you look at the tax burden in Sweden over the last period, it’s gone down, not up.”

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2022 SWEDISH ELECTION

Swedish PM: Moderate Party’s property tax warnings ‘completely absurd’

Sweden's prime minister, Magdalena Andersson, has yet again denied that her party plans to bring back a property tax, calling the Moderate Party's decision to campaign on the issue 'completely absurd'.

Swedish PM: Moderate Party's property tax warnings 'completely absurd'

In a long interview broadcast on Swedish state radio broadcaster SR, Andersson stressed that her party had no plans to bring back the property tax abolished by the Moderate-led government back in 2008. 

“We are not going to campaign on the back of a property tax, have no plans to do it, and have shown over the last eight years that we are not doing it,” she said. “It is completely absurd that the Moderates are running their campaign about this for the third or fourth time in a row. They were cranking this out in 2014, 2018 and now in 2022, and we have not brought back the property tax.” 

When pushed by the interviewer, however, Andersson refused to absolutely rule out making any changes to Sweden’s system of property taxation. 

“If I start to draw red lines, I will risk creating an even more locked situation after the election,” she said. “But there’s no question over what I believe. If you don’t want to bring back property tax, you should vote for the Social Democrats.” 

The Swedish Trade Union Confederation LO, is in favour of bringing back the property tax, which it describes as “one of the best taxes”, as is the Left Party.

After the interview, Tobias Billström and Elisabeth Svantesson, the Moderate Party’s group leader and financial spokesperson, said that by refusing to rule out bringing back the tax, Andersson had justified their decision to campaign on the issue. 

“Unequivocal message from Magdalena Andersson today in P1 Morgon,” Billström wrote on Twitter. “If the Left Party wants property tax to be reintroduced, it will happen. There are no red lines from S.” 

“Bringing back property tax is on the negotiating table,” Svantesson wrote. “She has no red lines there. Important — but expensive — message for Swedish households.” 

Andersson did, however, say that the Social Democrats want to raise taxes, saying that the party planned to bring in a new tax to fund building back Sweden’s defence capabilities, a so-called beredskapsskatt, or “preparedness tax”. 

“So that this will not end up taking priority over schools, pensions, healthcare and elderly care, we think that those with the highest incomes should be able to pay just a little bit extra towards this,” she said, although she would not go into detail on how “highest incomes” would be defined. 

“But in the economic situation we are in, it’s not the time to raise taxes for ordinary households,” she said. 

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